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Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?

Author

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  • Fath Julia

    (University of Cologne, Albertus-Magnus-Platz,Köln, Germany)

  • Fuest Clemens

    (University of Cologne, Albertus-Magnus-Platz,Köln, Germany)

Abstract

This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare.

Suggested Citation

  • Fath Julia & Fuest Clemens, 2005. "Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?," German Economic Review, De Gruyter, vol. 6(4), pages 471-483, December.
    • Handle: RePEc:bpj:germec:v:6:y:2005:i:4:p:471-483
    DOI: 10.1111/j.1468-0475.2005.00142.x
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    Cited by:

    1. Adrienne T. Edisis, 2016. "The Effect of Unemployment Insurance on Temporary Help Services Employment," Journal of Labor Research, Springer, vol. 37(4), pages 484-503, December.
    2. Florian Baumann & Nikolai Stähler, 2008. "Union Power as a Reason for Europe Not to Introduce Experience Rating?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 164(3), pages 568-585, September.
    3. repec:ces:ifodic:v:3:y:2005:i:2:p:14567656 is not listed on IDEAS
    4. Julia Fath & Clemens Fuest, 2005. "Experience Rating versus Employment Protection Laws in a Model where Firms Monitor Workers," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(2), pages 299-314, June.
    5. Sinko, Pekka, 2003. "Subsidizing vs. Experience Rating of Unemployment Insurance in Unionized Labor Markets," Discussion Papers 319, VATT Institute for Economic Research.
    6. Arranz, José M. & García-Serrano, Carlos, 2020. "Does unemployment benefit duration affect inflows into unemployment? The impact of a law change for older workers," The Journal of the Economics of Ageing, Elsevier, vol. 17(C).
    7. José María Arranz & Carlos García Serrano, 2015. "Los sistemas de prestaciones por desempleo de “experience rating”. Un análisis de los despidos temporales y los subsidios cruzados en España," Hacienda Pública Española / Review of Public Economics, IEF, vol. 212(1), pages 129-168, March.
    8. Julia Fath & Clemens Fuest, 2005. "Experience Rating of Unemployment Insurance in the US: A Model for Europe?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(2), pages 45-50, 07.

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